• PIN 8 PIN 8 CONSOLIDATED SUPERVISION

    • PIN 8.1 PIN 8.1 Introduction

      • PIN 8.1.1 PIN 8.1.1

        This Chapter applies to all Insurers, except for Rule 8.5.1 which applies only to ADGM Incorporated Insurers.

        • Guidance

          1. Group membership may be a source of both strength and weakness to an Insurer. The purpose of Group Risk requirements is to ensure that an Insurer takes proper account of the risks related to the Insurer's membership of a Group. The Group Risk requirements form a key part of the Regulator's overall approach to prudential supervision.
          2. An Insurer is subject to separate reporting requirements in respect of changes in its Controllers. Those requirements are set out in GEN 8.8. It may also be required to provide reports in respect of any Close Links it possesses.

      • PIN 8.1.2 PIN 8.1.2

        (1) If an Insurer is a member of a Financial Group and the Regulator considers it necessary to extend the scope of the Financial Group to include entities outside of the Financial Group to ensure appropriate Financial Group supervision, an Insurer must also include in the scope of the Financial Group any entity the Regulator may direct the Insurer in writing to include.
        (2) An Insurer may, for the purposes of this section, exclude from its Financial Group, any entity the inclusion of which would be misleading or inappropriate for the purposes of Financial Group supervision, provided the Insurer has obtained the Regulator's prior written approval to do so.
        (3) An Insurer must provide to the Regulator, where requested, information regarding other Group entities, the Group structure and the systems and controls in place to manage Group Risk.

        • Guidance

          If more than one member of the same Group is subject to an obligation to provide information in respect of a position of the Group, one or more of those Authorised Persons may make application to the Regulator for an appropriate waiver or modification of these Rules.

    • PIN 8.2 PIN 8.2 Systems and controls requirements

      • PIN 8.2.1 PIN 8.2.1

        If an Insurer is a member of a Group, it must establish and maintain systems and controls for the purpose of:

        (a) monitoring the effect on the Insurer of:
        (i) its relationship with other members of its Group;
        (ii) its membership in its Group; and
        (iii) the activities of other members of its Group; and
        (b) monitoring compliance with Financial Group supervision requirements below, including systems for the production of relevant data:
        (i) monitoring funding within the Financial Group; and
        (ii) monitoring compliance with Financial Group reporting requirements.

        • Guidance

          1. For the purposes of the above requirement, an Insurer may take into account its position within its Group, the materiality of the risk to which it is exposed because of its membership of the Group, and the access that it has to the systems and controls of other members of its Group and any information produced by them or by Associates. For example, it would be reasonable for a small Insurer within a larger Group to place some reliance on its Parent to ensure that appropriate systems and controls are in place.
          2. An Insurer may also consider together Groups whose Parents are all members of the same Group, except for any Group of which the Insurer is the Parent. An Insurer that is itself the Parent of a Group must give specific consideration to the risks to which it is exposed as the Parent. The Regulator will not otherwise however normally expect an Insurer to apply the provisions of this Rule to sub-Groups of a single Group.

    • PIN 8.3 PIN 8.3 Financial Group Capital Requirements and Financial Group Capital Resources

      • PIN 8.3.1

        (1) Rule 8.3 does not apply to an Insurer if:
        (a) the Insurer's Financial Group is already the subject of Financial Group prudential supervision by the Regulator as a result of the authorisation of another Financial Group member; or
        (b) the Regulator has confirmed in writing, in response to an application from the Insurer, that it is satisfied that the Insurer's Group is the subject of consolidated prudential supervision by an appropriate regulator; or
        (c) except where the Regulator has directed the inclusion of an entity pursuant to Rule 8.1.2(1), the percentage of total assets of Authorised Persons and Financial Institutions in the Financial Group is less than 40% of the total Financial Group assets.
        (2) Where an Insurer has received confirmation in writing from the Regulator in accordance with (1)(b), it must immediately advise the Regulator in writing if the circumstances upon which the confirmation was based change.

      • PIN 8.3.2 PIN 8.3.2

        Where a Financial Group contains both Insurers and Authorised Persons subject to the requirements in PRU, the Regulator shall determine which of the sectoral rules in Rule 8.3 and PRU 8.3 shall apply in respect of the group.

        Amended on 3 January 2018.

        • Guidance

          1. The objective of Rule 8.3.1(1)(a) is to avoid the necessity for multiple reporting of group capital adequacy.
          2. Where a Financial Group includes both Insurers and entities subject to PRU, it is necessary to determine whether the Financial Group supervision applicable to the Financial Group should be that set out in Chapter 8.3 or PRU 8.3. Normally, the Regulator will exercise its power under Rule 8.3.2 based on the relative size of the assets of the Financial Institutions undertaking Insurance Business (representing the insurance sector) and the assets of other Authorised Persons and Financial Institutions (representing a combined non-insurance sector). Pure holding companies will be excluded as being in neither sector. The Rules that will apply will be those of the sector with the larger total assets of the two. However, where the ratio of the assets of the two sectors differs by less than 1.5:1, the Regulator will consider a request from the Authorised Persons in the Financial Group to apply the sectoral rules applicable to the smaller of the two sectors.
          Amended on 3 January 2018.

      • PIN 8.3.3 PIN 8.3.3

        An Insurer must ensure at all times that its Financial Group Capital Resources, as calculated in Rule 8.3.5, are equal to or in excess of its Financial Group Capital Requirement as calculated in Rule 8.3.4.

        • Guidance

          If an Insurer breaches Rule 8.3.3, the Regulator will take into account the full circumstances of the case including any remedial steps taken by another regulator or the Authorised Person, in determining what action it will take.

      • Financial group capital requirement

        • PIN 8.3.4

          (1) An Insurer must calculate its Financial Group Capital Requirement as the sum of the entity requirements calculated in accordance with (2) and (3);
          (2) Entity requirements for this purpose are:
          (a) an Authorised Person's Capital Requirement or Minimum Capital Requirement calculated in accordance with the requirements of whichever of the PRU or PIN Rulebook applies to that Authorised Person;
          (b) in the case of regulated entities supervised by a regulator other than the Regulator, then, with the written agreement of the Regulator, the capital requirement of that entity; and
          (c) for other entities in the Financial Group, a notional capital requirement calculated as directed by the Regulator.
          (3) Where an Authorised Person's Financial Group includes an entity under (c) of the definition of Financial Group in the GLO Rulebook, that Financial Institution's capital requirement is include on a proportionate basis.
          Amended on (3 February, 2020).

      • Financial Group Capital Resources

        • PIN 8.3.5 PIN 8.3.5

          (1) An Insurer must calculate its Financial Group Capital Resources by applying either of the following methods, excluding those amounts referred to in Rule 8.3.6:
          (a) the accounting consolidation method which calculates the Adjusted Capital Resources of the Financial Group based on the Financial Group's consolidated financial statements; or
          (b) the aggregation method, which is the sum of:
          (i) the Adjusted Capital Resources of the Parent of the Financial Group;
          (ii) subject to (3), the Adjusted Capital Resources calculated in accordance with the PIN Rulebook, or the Capital Resources calculated in accordance with the PRU Rulebook, as may be appropriate, of Financial Institutions included in the Financial Group; and
          (iii) subject to (3), the Financial Group's proportionate share of the Adjusted Capital Resources calculated in accordance with the PIN Rulebook, or the Capital Resources calculated in accordance with the PRU Rulebook, as may be appropriate, of Financial Institution participations included in the Financial Group.
          (2) In calculating the Adjusted Capital Resources of a member of the Financial Group or of the Financial Group, an Insurer must follow the method of calculation set out in A3.2, with the exception that the deduction set out in A3.4.3(b) need not be made.
          (3) For the purposes of (1)(b)(ii) and (iii) an investment by one Financial Group member in another must not be included.
          Amended on (3 February, 2020).

          • Guidance

            1. The calculation of Financial Group Capital Resources is subject to Rule 3.5 which limits the amount of hybrid capital (including subordinated debt) that may be included in Adjusted Capital Resources.
            2. In the calculation of Capital Resources of Financial Institutions that are Financial Group members in accordance with the PRU Rulebook, an Insurer applies to that member the deductions for illiquid assets and material holdings and Qualifying Holdings set out in the PRU Rulebook.
            3. The deduction set out at Rule 8.3.5(3) need not be made to the extent that the investment has already been excluded in whole or part by virtue of the application of the limits described in paragraphs 1 and 2 of this Guidance.
            Amended on (3 February, 2020).

        • PIN 8.3.6 PIN 8.3.6

          When calculating the Financial Group Capital Resources of a Financial Group, an Insurer must not include Capital Resources or Adjusted Capital Resources (as the case may be) of Subsidiaries or participations to the extent that those Capital Resources or Adjusted Capital Resources:

          (a) exceed the entity requirement in respect of that Subsidiary or participation, calculated in accordance with Rule 8.3.4; and
          (b) are not freely transferable within the Financial Group.

          • Guidance

            1. Because the Financial Group Capital Requirement set out in Rule 8.3.4 includes capital requirements in respect of Group entities, capital resources may be included in the calculation of Financial Group Capital Resources to the extent of those requirements. Capital that is surplus to those requirements is however subject to an additional condition before it may be taken into account for the purposes of capital adequacy of the Financial Group.
            2. In general, Capital Resources or Adjusted Capital Resources are not considered to be freely transferable if they are subject to a legal or constructive limitation on their transferability, whether that transfer would be made by dividend, return or capital or other form of distribution. Examples of relevant limitations include obligations to maintain Minimum Capital Requirements to meet domestic solvency requirements, or comply with debt covenants.

    • PIN 8.4 PIN 8.4 Transactions within a group

      • PIN 8.4.1 PIN 8.4.1

        This section applies to all Insurers in respect of all transactions that are material.

        • Guidance

          A single transaction or series of connected transactions that constitute a sale, purchase, exchange, loan or extension of credit, investment or guarantee involving one-half of one percent (0.5%) or less of surplus as at the end of the financial year preceding the effective date of the transaction will not normally be considered material for the purposes of this section.

      • PIN 8.4.2

        Transactions entered into by an Insurer with Related entities must comply with the following conditions:

        (a) the terms of the transactions must be fair and reasonable; and
        (b) the books, accounts and records of the Insurer must clearly and accurately disclose the nature and details of the transactions including any accounting information necessary to support the fairness and reasonableness of the terms and conditions of the transactions.

    • PIN 8.5 PIN 8.5 Significant transactions other than group transactions

      • PIN 8.5.1

        (1) An ADGM Incorporated Insurer must not enter into a transaction of the type described in this Rule unless the directors of the Insurer are satisfied following reasonable enquiry that the transaction is at arms-length and does not adversely affect the interests of policyholders. The transactions to be considered are:
        (a) a sale, purchase, exchange, loan or extension of credit, guarantee or investment where the counterparty is a Person Related to the Insurer and the amount of the transaction equals or exceeds 3% of the Insurer's surplus as at the end of the financial year immediately preceding the transaction;
        (b) a loan or extension of credit to any Person who is not Related to the Insurer, where the Insurer makes the loan or extension of credit with the agreement or understanding that the proceeds of the transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to purchase assets of, or to make investments in, any Related party of the Insurer, where the amount of the transaction equals or exceeds 3% of the Insurer's surplus as at the end of the reporting period immediately preceding the transaction;
        (c) a reinsurance agreement or modification to a reinsurance agreement in which the reinsurance premium or a change in the Insurer's liabilities equals or exceeds 5% of the Insurer's surplus;
        (d) a reinsurance agreement or modification to a reinsurance agreement involving the transfer of assets from an Insurer to a Person not Related to the Insurer, if an agreement or understanding exists between the Insurer and that Person that any portion of the assets will be transferred to one or more other Persons Related to the Insurer and the reinsurance premium or a change in the Insurer's liabilities equals or exceeds 5% of the Insurer's surplus; and
        (e) any management agreement, service contract or cost-sharing arrangement.
        (2) For the purposes of (1), "surplus" means:
        (a) in the case of an Insurer that is not a Cell Company, the Insurer's Adjusted Capital Resources; and
        (b) in the case of an Insurer that is a Cell Company, the Insurer's Adjusted Cellular Capital Resources in respect of the Cell to which the transaction relates, where the transaction relates to a Cell, and otherwise the Insurer's Adjusted Non-Cellular Capital Resources.

      • PIN 8.5.2

        An Insurer must report to the Regulator all dividends and other distributions to shareholders within twenty-one days following the declaration of the dividend or distribution.

      • PIN 8.5.3

        An Insurer that is a Takaful Insurer must report to the Regulator all distributions of profit or surplus (however called or described) to policyholders within twenty- one days of the date of declaration of the distribution.

      • PIN 8.5.4

        An Insurer must notify the Regulator in writing within thirty days if the Insurer makes an investment in a body corporate to which it is Related, if the total investment in the Related body corporate by the Insurer and other bodies corporate to which the Insurer is Related exceeds 10% of the body corporate's paid-up capital or voting rights.